The Market Moves

by Ernie von Simson

Apple’s integrated business model is rattling last year’s IT leaders just as minicomputer companies were rattled and ultimately destroyed by the PC and the PC’s “layered” business model two decades ago.

When the market moves, even the soundest business strategy cannot withstand such shock waves.

And the market is obviously moving as the enterprise CIOs refocus from PCs and websites to iPhones, Droids and iPads.

Many large companies have developed apps that build brand and enhance revenues by offering consumers time-saving convenience; useful and usable information; or, best of all in this dark economy, real savings from lower prices. A few examples include:

Bending the Cost Curve: A major health insurer is coupling apps with Big Data analytics to help its policyholders find the best and most cost effective source of medical attention, both near home and wherever the person may be traveling. That’s great for the person, good for the insurance company, and perhaps a credible early harbinger of “bending” the hitherto relentless upward curve of health care costs.

Selling Product: Automobile company apps embed a powerful dashboard of warning flags like reduced battery charge, low tire pressure, bearing vibration, etc. The ability to start the vehicle through the phone is cute but the information is even more valuable. These apps are credited with actually selling cars and other services.

Selling Services: Home security service apps let customers engage and disengage intrusion alarms while also receiving alerts of open windows and garage doors and images captured by nanny cams. Significantly, these systems are easier for the customer to operate than the systems built into the home. So again, the apps help sell the basic home-monitoring service.

Extending Customer Service: Banks are offering their small- and medium-business owners apps that help allocate transactions to accounts and engage their own customers. Over time, these “free” apps could set off a new competition with commercial SaaS vendors by mirroring functions offered today for a price. But meanwhile the apps are improving relationships with the bank’s most profitable customers.

Discounting Products: Makers of consumer packaged goods like snacks and cereals want to link “opt-in” consumer databases with smart phone apps. They help consumers save money by driving coupons to their cell phones while they’re in the supermarket filling their grocery carts. This real-time notification at point of purchase will effectively displace coupons clipped from newspapers or sent through the mail.

CIO focus on smartphone and tablet apps is just one indicator of Apple’s impact on the IT market. Another is the radical shift in how smartphones and tablets are governed in major corporations. I’ll have more to say on that in my next blog.

Ernie von Simson is the senior partner in the CIO Strategy Exchange and the author of The Limits of Strategy an inside analysis of the success and failure of IT companies over the past 30 years.

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